Demystifying the ‘green’ power tariff

When you are deeply concerned about global warming, ‘green’ or ‘renewable’ electricity tariffs and suppliers may sound attractive; but the hard reality is that signing up is unlikely to reduce the climate change impact of your electricity significantly, writes Mike Berners-Lee in ‘How Bad Are Bananas?’ (www.vivagroupindia.com). This applies whatever the colour of the company’s logo or however ecological the company name might sound, he adds.

Listing the two main claims made by ‘green’ providers – that electricity comes from renewable sources and/ or that they use the money you spend on your bills to invest in a new renewable capacity – the author notes that neither of these is necessarily what it might appear.

Renewable sources

On the ‘from renewable sources’ claim, Berners-Lee cites the UK regulations that require electricity suppliers to submit Renewable Obligation Certificates (ROCs) to the government for up to 10.4 per cent of the electricity they sell to their customers. What queers the pitch, however, is that the suppliers can get these certificates either from generating their own renewable power or by buying from others.

Since the normal practice is for the ‘green supplier’ to sell surplus ROCs to other suppliers, thereby allowing them to simply source less of their own power from renewables, the author frets that the net carbon benefit is zero though the ‘green supplier’ is quids-in because it has managed to charge you a premium.

He explains that the tariff only makes a difference to the extent that the provider retires some ROCs (tears them up) instead of selling them on. “In the UK, Good Energy claims to do this with 5 per cent of them, although this has been challenged, with some people suggesting they have only been retiring 2 or 3 per cent. It doesn’t much matter, because they are arguing over such low percentages.”

The main point, as Berners-Lee emphasises, is that well over 90 per cent of the ROCs are kept in circulation. He cautions, therefore, that if you switch to the ‘green tariff’ offered by one of the larger electricity suppliers, the chances are that no ROCs are retired at all and you are allowing them to worsen the energy mix in their other tariffs, while using the ‘green’ story line as a way of charging you a premium.

Investing in renewables

The second claim of ‘investing in renewables’ is about companies that aver they invest so much of the power revenues in new windfarms and other renewable energy projects. The author sees this as an instance of a company engaging in two different business activities, one as an electricity provider but with ‘green’ branding, and the other as renewable power generator.

Both of these could potentially be good business opportunities regardless of any environmental considerations, he observes. “The key question is whether the investments in the new windfarms would still be made if you got your electricity from elsewhere. Is the company promising to invest to the tune of your electricity spend in projects that would otherwise not go ahead at all? In other words, is it genuinely additional?”

Conceding that these companies may probably be greener than the average electricity suppliers, Berners-Lee sums up his message that if you want to reduce the footprint of the electricity you buy via the grid, the only real way to do it is to consume less.